Subprime panic again

GLOBAL MARKETS

Asian stocks dropped for a second day after comments by a senior Japanese government official reignited concern losses from US subprime mortgages will spread.

Mizuho Financial Group, Japan's second-biggest bank, fell the most in more than two weeks after the country's chief financial regulator said he would monitor credit market losses at the nation's lenders. Mitsubishi Estate Co led property shares lower after the chairman of Japan's No 2 homebuilder said a real-estate "bubble'' might burst.

The Hang Seng Index closed above 24,000 for the first time, paced by Sun Hung Kai Properties after the Hong Kong government said home sales increased last month. Hynix Semiconductor advanced on an industry report that said global chip sales rose.

The Morgan Stanley Capital International Asia-Pacific Index slipped 0.6 per cent to 150.91 at 7:54 pm in Tokyo, following a 0.4 per cent slide yesterday. Japan's Nikkei 225 Stock Average dropped 1.6 per cent to 16,158.54. Markets also fell in Australia, South Korea, Taiwan, India, Indonesia and Vietnam.

J Front Retailing Co Ltd, Japan's biggest department store operator, surged on a Goldman, Sachs & Co "buy'' recommendation. Coates Hire Ltd, Australia's biggest machinery rental company, jumped on a takeover offer.

Concerns that a lack of liquidity in credit markets, prompted by rising defaults by US higher-risk home-loan borrowers, will slow global economic growth sparked a sell-off in July that wiped at least $5.5 trillion from the value of equities worldwide.

Mizuho Financial Group declined 2.4 per cent to 702,000 yen, the most since August 17. Sumitomo Mitsui Financial Group, Japan's third-largest bank, dropped 1.5 per cent to 872,000 yen, its lowest since September 2005.

Japan's chief financial regulator Yoshimi Watanabe said the government was watching finance companies' half-year earnings for any losses related to the US subprime mortgage crisis.

Sun Hung Kai, Hong Kong's No 1 developer by market value, added 1.5 per cent to HK$109.30. Hang Lung Properties, a Hong Kong-based developer, rose 5.4 per cent to HK$30.50. South Korea's Hynix, the world's second-biggest computer- memory maker, rose 0.6 per cent to 32,800 won. Taiwan Semiconductor Manufacturing Co, the largest maker of customised chips, added 0.3 per cent to NT$61.80. Chartered Semiconductor Manufacturing gained 1 per cent to S$1.06 in Singapore.

Europe

European stocks fell on concern that the increase in borrowing costs caused by the collapse of US subprime mortgages will hurt banks' earnings.

Bradford & Bingley paced a decline in Europe after Lehman Brothers Holdings cut its recommendation on shares of the UK mortgage lender, saying rising loan costs may erode earnings.

The Morgan Stanley Capital International World Index lost 0.3 per cent to 1,567.83, while S&P 500 futures slipped 0.7 per cent to 1,479.5 as of 11:56 am in London.

"I am negative about the outlook for stocks and would not buy right now,'' said Alejandro Velasco, who helps manage $530 million at Banca Privada D'Andorra in Andorra. "What worries me most is the upcoming earnings season. We still have not seen all the problems from subprime, failed debt investments and other issues.''

Money-market rates are "the first barometer of the crisis'', said Roland Lescure, chief investment officer at Groupama Asset Management in Paris, which oversees $120 billion. "It reflects the lack of confidence of financial institutions. We don't yet know the impact on banks' earnings.''

Europe's Dow Jones Stoxx 600 Index fell 0.5 per cent to 377.54. National benchmarks dropped in 15 of the 18 western European markets. Germany's DAX Index lost 0.4 per cent, while France's CAC 40 slipped 0.6 per cent. The UK's FTSE 100 decreased 0.3 per cent.

Bradford & Bingley, which provides about one in five loans to UK landlords, decreased 2.4 per cent to 373.5 pence. The shares were cut to "underweight'' from "overweight'' at Lehman Brothers.

Societe Generale, France's third-largest bank, slid 1.7 per cent to 119.9 euros. Northern Rock, the worst performing UK bank stock this year, sank 3.3 per cent to 708 pence. Lehman reduced its recommendation on shares of both banks to "underweight'' from "equal weight''.

Mattel slipped 48 cents to $21.49 in Germany. The world's largest toymaker announced its third recall in five weeks after finding about 848,000 Chinese-made Barbie and Fisher-Price products with paint that may contain excessive levels of lead.

Anglo Irish Bank added 1.8 per cent to 14.40 euros. The country's third-largest lender by market value said earnings for the year ending in September will exceed analysts' estimates as it increases lending.

BP climbed 0.6 per cent to 564.5 pence. Europe's second- biggest oil company was raised to "outperform'' by Sanford C Bernstein & Co because of new fields set to start production and improved refinery performance.

US

US stock and index futures retreated on speculation turmoil in credit markets will hurt earnings and economic growth.

JPMorgan Chase & Co, the third-largest US bank, fell in Europe. Mattel, the world's largest toymaker, dropped following its third recall of China-made products in five weeks.

Standard & Poor's 500 Index futures expiring in September lost 10.9 to 1,478.7 as of 11:39 am in London. Dow Jones Industrial Average futures slipped 72 to 13,384 and Nasdaq 100 Index futures dropped 8.25 to 2,016.5.

US stocks rallied yesterday after investors returning from vacation bought technology, energy and financial shares, betting the summer sell-off isn't justified by corporate earnings.

The Organization for Economic Cooperation and Development today lowered its 2007 growth estimate for the US economy to 1.9 per cent from 2.1 per cent. A housing report may indicate Americans signed fewer contracts to buy previously owned homes in July. A separate report showed declining sales of commercial properties.